What are intermediate goods? Why do economists exclude the value of intermediate goods while calculating national income?
Intermediate goods are goods used as inputs in the production of other goods. There would be a problem of multiple counting if we include the value of both intermediate goods and final goods. For example, if chips sold to computer manufacturers were included in GDP, we would count the same chip when it was sold to the computer maker and then again as a component of the computer when it was sold to a consumer. Only final goods and services count in the GDP.
You might also like to view...
Which of the following is true of the relationship between price and marginal cost under monopolistic competition?
a. P = MC at all levels of output b. P = MC only at the profit-maximizing quantity c. P > MC at the profit-maximizing quantity d. P < MC at the profit-maximizing quantity e. P < MC at the quantities below the profit-maximizing quantity
If a firm perceived that the other firm in an implicit pricing agreement dropped its price in response to a change in market conditions, then its most likely response would be to:
A. match the other firm's price. B. engage in a price war. C. raise price to punish the other firm. D. keep its price the same.
If the total cost of production for 1000 widgets is $2000 and marginal cost is constant at $1, what is the average fixed cost for the 1000 widgets?
A) $2 B) $1.50 C) $1 D) $0.50
If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will
a. raise price and decrease output. b. lower price and increase output. c. reduce both output and price. d. hold output constant and raise price.